A critical aspect of Wall Street and
investor appraisal of a company entails evaluating management:
gauging executive leadership, quality, character and values. Top
management is a linchpin behind any true, long-term equity investment
decision. In my book, Full of Bull, I devote an entire
chapter to executive traits as a revealing investment yardstick.
Surprisingly, executives, who have an inordinate influence on their
stock price, often transmit the wrong signals and act improperly with
investors. Such executive demeanor speaks volumes to investors.

Investors Look
for
Favorable Leadership Traits

Candor, Access. Executives
gain credibility by being forthright, and freely
discussing negative cross currents and challenges. Management must
be open, available, and responsive to Wall Street and investors, not
evasive or secretive.

Humble, Genuine.
Executives should be modest, unassuming and even self-deprecating. They
should be real, not pompous. Warren Buffet comes to mind. He
schmoozes with the little guy, eats hamburgers with Bill Gates in the
local diner and speaks with brutal frankness. Executives should
willingly admit mistakes and alter course. No one is perfect or
invincible.

Trust, Quality,
Class. Management must be honorable; its comments reliable, and
actions
straightforward. It should act with class and not be litigious,
vindictive, shady or sleazy. Investors need to be able to trust
executives to the core.

Hands on, in Touch. Executives
should be aware of what is occurring within the
company at several levels, be in contact with the little people and
not buffered by multiple management levels. Ross Perot was a master
at this, chatting with his lowest-level associates in the elevator
and in the cafeteria. John Chambers at Cisco engages all strata of
employees.
Outgoing, Aggressive,
Confident. Yes, these attributes can co-exist with humility.
Executives should not be shy, inward or parochial. There needs to be
a certain toughness, assertiveness and conviction as long as there is
the realization of vulnerability.

Old-Fashioned
Business
Values. Management should be long-term oriented, use no stopgap
acts to boost immediate earnings, have a certain discipline and avoid
overpaying for acquisitions. They should not have sumptuous
headquarters or ostentatious perks. They should care about low-level
employees and small clients.

Undesirable
Executive
Behavior Is Off-putting

Dodging Culpability. Does
management assume responsibility for negative setbacks? Does the buck
stop with them? Or do they deflect responsibility? Blaming outside
causes beyond management's control -- the economy,
foreign currency, government, irrational competitor pricing, consumer
spending, interest rates, etc. -- is highly damaging to executive
credibility. When Krispy Kreme Doughnuts lowered its earnings
guidance and indicated an SEC investigation was in progress, it
attributed slower sales to the low-carbohydrate diet craze. It was
curious that Dunkin' Donuts incurred no such weakness.

Dictator Surrounded
by
Yes-Men. CEOs or chairmen who are tyrannical dictators, sticking
their noses in every detail, encircled by weak, wimpy yes-men, are
likely to hit a brick wall. They chase away real talent and
effective leaders. Overly domineering autocrats create a vacuum in
the management ranks. The company outgrows them.

Doing Too Much,
Lacking Focus. Leaders should not be spread too thin, travel too
heavily, or make too many speeches or appearances. They cannot work
effectively on the road. Talk and rah-rah boosterism with employees
and clients ring hollow; often they are a substitute for the hard
work of running the company. Executives need to concentrate on one
or two big aspects, not try to do scores of tasks.

Hubris, Ego,
Overconfidence. Company leaders should not be arrogant -- no
attitude or egos, hype, or PR baloney. Excessive pride is a setup
for a fall. Too much ego is blinding. Roger Lowenstein of The New
York Times said it best: "Hubris is not the worst crime -- merely
the one that guarantees the surest retribution." A superior
peacock posture engenders hazardous attitudes, such as believing that
a strategy is foolproof, overlooking competition or not listening to
clients. Surprise setbacks are sure to follow.

Hype, Marketing, All
Show. Executives prominently featured in their own company
advertising campaigns represent a red flag. Full-page ads and
splashy airport billboards bother investors. EDS ran a massive
promotion with Super Bowl commercials, justifying the blitz as "air
cover for the sales force." The company later floundered and that
chairman was replaced. Carly Fiorina featured herself in
Hewlett-Packard ads and was later dismissed by the board. Beware of
over-the-top hype and executive-centered publicity.

Stock Price Fixation.
When the daily stock price is displayed at the corporate entrance
check-in desk, in the employee cafeteria, at analyst meetings and on
conference calls, it connotes a short-term executive mindset. Executive
discussion of stock valuation is repulsive. It indicates
they are managing the stock price instead of the company. Funny how
when the share price is skyrocketing, executives take full credit for
their brilliant vision, strategy, and execution and never account for
a bull market or a favorable industry sector. For some reason, after
the price plummets their stock prattle is muted and the stock quote
is no longer widely displayed around the office.

Designer Suits,
Fingernail Polish, Flamboyant Attire. Investors are wary of
executives who are overly coiffed, with fingernail polish, monograms,
big rings, and fancy designer suits, who look as though they just
walked out of the salon. Too much emphasis on appearance is a
turnoff. These types lack substance and genuineness. Other
affectations or cutesy personal marks such as male ponytails are also
a no-no. Investors prefer to see success demonstrated through
actions rather than with fancy accouterments.

Investors and Wall
Street
are constantly judging executive leadership aptitude and appraising
management prowess to determine a company's prospects. Little
things mean a lot. These factors are an important influence on a
company's stock price.

Mr. McClellan has a Chartered Financial Analyst (CFA) designation,
is a
member of the New York CFA Society and the CFA Institute, was President
of the New York Computer Industry Analyst Group, and was President and
Founder of the Software/Services Analyst Group. He has made television
appearances on Bloomberg TV, FoxBusiness News, CBS, CNN MoneyLine,
CNBC, and Wall Street Week. He has conducted several radio
interviews on such programs as Bob Brinker's Moneytalk and
given presentations to numerous organizations, at conferences, and to
companies. Mr. McClellan has published articles in the Financial
Times, The New York Times, Forbes, and other
publications. His MBA in Finance is from George Washington University
and his BA is from Syracuse University.